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Gartner analyst scrutinizes SCO-Linux flap

Analyst George Weiss digs into the SCO Group's legal action against IBM and Linux and details what it's done to SCO's business and what CIOs are saying.

ORLANDO, Fla. –- Back in May, when the SCO vs. IBM issue was heating up, Gartner analyst George Weiss advised enterprises to consider their Linux plans with caution. Since then, a couple of more lawsuits have been filed, SCO's received a cash infusion from venture capital firm BayStar Capital, and the dispute's course has only become more murky. In this interview with, Weiss offers his take on what's going on with the fight.

What do you make of BayStar's decision to grant $50 million to SCO? How much will that help SCO?

George Weiss: I think that this [money] is really kind of a gift from the venture capitalist who thinks that maybe there's a chance of a big payoff here and that [SCO] needs the money to sustain their campaign. So it's not surprising that that is one of their tactics.

I can't say much more about it, other than that I think they're playing a strategic game of banking on intellectual property as an important revenue generator to drive up their stock price and then, if and when that should happen, to get out of the market, essentially, or sell themselves out to the highest bidder.

My feeling was that the other part of the business was pretty much getting destroyed in the process. So it looks like an end game to me.

The other part being what was their Linux business?

Weiss: [What] was their Linux business is probably totally destroyed now. I was even talking about the other parts of the business aimed at their customer install base and extending their software portfolio and things like that. The amount of community ill will that they're generating is going to work against them over the long term, even if they have good products. You have to function in a viable community that trusts you, that feels that you're a member in good standing, with partners and other things. So I just don't have that feeling that that's going to be sustainable, as long as this lawsuit is carried on.

I mean, consider the scenario here of them going out to sue hundreds of users in the marketplace, and at the same time trying to sell to markets -– they may not be the same markets, but nevertheless, to be able to campaign and be selling the good will, the trust, the longevity of the company: 'Trust us; we'll be your partner. We'll be here for the long term.' And meanwhile, there's another segment of the community that is so inflamed and aggravated, with vendors countersuing them, that there's a high level of uncertainty placed on SCO's business itself.

You mentioned that it's not surprising that they would want this venture capital money. Is it surprising, though, that someone would give it to them?

Weiss: I read [a] document from a well-known financial analyst firm that said that they were recommending SCO to the [high-risk-oriented] investor, that the stock could rise to $45 a share in some given time frame because of the potential of this intellectual property issue they have over the Linux community. [They were] saying 'Hey, why don't you go for it.'

So, if there are people in the financial investment community doing that, then why not venture capital companies? And, of course, for the executives of SCO, if the stock price were to ever reach even half that amount, they might bail out anyway. So this is turning into kind of a casino game.

Never mind, though, the fact that they're also betting against IBM, and HP, and Silicon Graphics, and Fujitsu and a number of other Unix firms, all of whom probably did some analysis of the code and, you know, are remaining pretty steadfast in terms of resisting. At least, IBM is resisting.

There's only one possibility here that I would've like to see and that is that the vendors really pitch in and create a wall of indemnification for the users, because I see it having some effect on orders, on potential orders over the longer term. And it's not coming from the people that are developers. It's the CIO-level people that are concerned.

Are you familiar with the Credit Suisse First Boston survey, which found that 84% of CIOs have not changed their Linux plans?

Weiss: I saw that. Well, take that 84%. So that means 16% of CIOs would not cut a check for Linux. I wouldn't be happy with even that number. I mean, that may feel good, but it's still a message that there's a number of CIOs out there that are sufficiently concerned about it, and I've spoken to some.

The way SCO is waging this war is in what appears to be fairly well-planned, carefully staged actions to up the pressure and threats to the users. It's done on a timely basis, almost monthly, or bimonthly, where there is some other action, like: 'We're going to send you invoices. We will meet with you to negotiate prices. We will double the price if you don't come through by a certain date.' And so on. That's a well-orchestrated campaign. And, you know, you take a snapshot in time like CSFB did, you know, it only has validity for that one point in time. You have to look at this in a longitudinal way and look at the cumulative impact of constant pressure. And if there's no escape valve, such as what, let's say, HP is planning, then users keep hearing this message; the CIOs keep hearing the message. The CEOs start asking the CIOs, 'What are you doing about it? Are you going to have us in court?' So I would say that you can never just plain discount completely this kind of action.

The only other way would have been that the Linux community, under Linus Torvalds, had some kind of a system that was able to filter out, or screen, or qualify contributions, not only for technical capabilities but for their legality, which I don't think they have.

[Another possibility would have been] that some other member of that community, or an organization would have been formed to be able to actually say that, 'We're providing every user of Linux an indemnification. We'll take the responsibility.' That hasn't happened yet.

You mentioned how SCO has choreographed this campaign, timing it so that they have a big announcement every month or so. It's kind of interesting that right after they said they weren't going to send invoices to companies using Linux, they got this $50 million from BayStar. Do you see any confusion here in their strategy?

Weiss: They've made some excuses about it. But I honestly think that they have financial issues. If you do some modeling, [if you have] 100 users that you send invoices to, and they don't respond, then you need to follow up with that, or your game is called. That means court actions, subpoenas, all of which is a costly process. So they were in that limbo state, where they felt that they didn't want to risk going out on that level.

Read part 2 of's interview with Gartner analyst George Weiss tomorrow.

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